Jordan Schleider and NQ Trader on Margins

Jordan Schleider and NQ Trader on Margins
This is a short article on margin requirement for trading futures by Jordan Schleider founder of NQ Trader. Jordan Schleider is the head trader and an expert at scalping the e-mini’s. He has over 30 years of trading and investing experience in many different financial markets.
For the purpose of this example, let’s assume the intraday margin required is $500 per contract traded. This is standard with many futures instruments today. If you want to trade during the day, you are required to have enough money in your account to at least cover the intraday margin and commissions. It is sort of like a security deposit plus some cushion that the brokerage requires.
Let’s say you have $600 in an account and your margin requirements are $500. You will be able to trade 1 futures contract. In this example your maximum risk exposure would be about $100. As soon as you hit the buy or sell button the broker puts an electronic $500 hold on the money you have in your account and you will have a $100 available balance. This amount will be called your excess liquidity. Next the broker will deduct the one way commission or cost per turn which can vary, but the average is about $2. This amount is deducted from the available balance or excess liquidity so your new balance would be $98 plus the $500 on hold.
If the trade goes in your favor by $30, your available balance will move up to $128. When you close the trade you get charged another $2 commission, so your balance is now $126, then the security/margin is released, and your balance goes to $626.
Take the same example with the trade going against you. If you lose $30 on the trade your available liquidity would drop from $98 to $68. When you close the trade you get charged another $2 commission, so your balance is now $66, then the security/margin is released, and your balance goes to up to $566. Your maximum risk exposure would still only be about $100 or the amount you have in your account over the minimum margin requirements.
This maximum exposure can occur if you do not close the trade on your own or you run out of liquidity which in our example is $100. In this case an automatic margin call will take place and close the trade for you when your account drops to the $100 threshold. The margin call will initiate at the depletion of your excess liquidity and another $2 commission will be deducted from your available $500 margin before it is released. Now your account balance is $498. Your maximum risk and loss was $102. There is a possibility that your broker will charge you for the margin call. This is usually a small fee and there could also be a broker assisted trade fee.
You will always have the margin amount left in your account minus any fees. So in summary, the margin is like a refundable security deposit. You would always need a few more dollars than the margin requirements to trade, that’s why I started the example with $600.
Thanks for taking the time to read my article. If you want to contact me at NQ Trader my name again is Jordan Schleider and my email is Jordan@nqtrader.us.

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